Individual charity, public welfare services and non-governmental organisation

 

While people have always had the capacity to be altruistic, it is highly likely that such behaviour was rarely exhibited in the early stages of human evolution, except in those special cases where the recipient was either a relative or friend of the donor. This was primarily because, with some exceptions, most people had significantly fewer resources at their disposal than they do in our current age of relative prosperity. As a result, it was only logical that they would prefer to retain their available resources for their own private consumption, so that, on many occasions, they would be unable to be charitable to others. At other times, potential donors would be put off donating if they believed that, on their own, they would be unable to have any meaningful effect on the welfare of needy individuals. This poor state of affairs proved to be disturbing to many members of society, who believed that some alternative way of assisting those who required assistance in fending for themselves needed to be developed, as relying solely on the charity of the proverbial “good Samaritan” was insufficient. Although direct interaction between donors and recipients was to continue, a more desirable approach would be to create organised bodies that could act as intermediaries and manage altruism in a communal manner, where donations could be acquired from a variety of contributors and then be distributed to recipients in a more efficient manner than was possible with private one-on-one altruism.

 

As religious bodies played a key role in early societies, it was only natural that they would be amongst the first institutions to organise altruistic activities of a communal nature. One well-known example of such organised altruism was the tithe, where the early Hebrews were required to surrender one-tenth of their annual income to the relevant religious authorities [1]. Although the tithe was initially a tax to provide for the upkeep of temples and religious workers, it was also later used as a means for society to provide charitable assistance to the poor, widows and orphans, who were deemed to be amongst the most marginal members of society [2]. Gradually, the range and scope of charitable activities carried out by religious organisations grew substantially, especially in those regions where custom led to religious bodies becoming de facto organs of the state. For example, religious orders such as the Templars and Knights of St. John were to play an increasingly important role in providing assistance to needy populations in fields as diverse as health care and military protection.

 

Over time, the importance of these religious bodies lessened, so that while they continued to play a valuable role in co-ordinating altruistic activities, they were no longer able to exercise the same degree of power they once had. This change was attributable to several factors, each of which had varying significance in different countries. Firstly, the impact of the Reformation, coupled with the wide-scale confiscation of properties and assets by the state or crown, ensured that the capacity of these bodies to carry out their charitable functions was severely curtailed. A second factor was dissatisfaction at the manner in which they operated, as not all of them were deemed to be efficient in carrying out their tasks, leading to calls for them to be replaced [3]. A third factor, which was to have a greater long- term impact, was the steady drift in many societies towards a secular way of living, where individuals, who no longer felt bound to hold the same dogma as their forefathers, decided that the role played by religious bodies in society needed to be redefined, with a consequent separation of church and state. Under such circumstances, fertile ground was provided for the growth of new charitable entities that had either limited religious ties, such as the Salvation Army, or were totally free of such links, such as the Red Cross. However, it was primarily through the state that new ways of engaging in communal altruism were developed, with government agencies steadily replacing religious bodies in meeting the welfare requirements of citizens.

 

The term “welfare state”, which first entered the English language in 1941, is derived from the German concept of Wohlfahrstaat, whose origins lie in the social reforms introduced in the late nineteenth century by the Prussian chancellor Bismark [4]. In essence, the welfare state can be defined as being a form of limited state intervention in the operation of the market economy, designed to ensure that all individuals receive a minimum level of income and services, without distinction towards class or social status. In principle, the key features of a welfare state encompass the coverage of social insurance for events such as industrial accidents, unemployment and retirement, as well as the provision of basic services such as education, health care and housing. In practise though, the exact requirements of what must be provided in order for a welfare state to come into being are not fixed. This is since the welfare systems of different countries vary immensely with respect to the range and depth of services on offer, with some states offering services and amenities that are more comprehensive in scope than they are in others. It is because of this blurred boundary, along with the intervention of government in the market, that many people presume that there is no distinction whatsoever between a centrally planned economy and a welfare state. This is, unfortunately, an erroneous view, because although the state may indirectly finance or directly provide welfare benefits, this is done in accordance with the voluntary wishes of the public, who desire and concede to the public provision of such services. Such acts are thus very different to the concept of central planning, where the state intervenes in the production and consumption decisions of private parties on a regular basis without their consent [5].

 

Two very important advantages are alleged to arise from using a government agency to organise and distribute altruistic gifts. First, government is able to use the tools at its disposal, especially the tax and legal systems, to prevent free riding from taking place. In this way, state agencies and other parties with an interest in this matter will, according to their own internal methods, determine what levels of charitable aid the average member of society feel should be given to “needy” recipients. What often goes wrong with private altruism is that many people will either refuse to donate funds to a charitable cause or will give less than they would really like if they feel that other potential donors are holding back and are not giving as much as they can or want to. This can then lead to an impasse, where even though everybody wants to donate more, no one does so for fear that the other parties will not reciprocate and give their true valuation of charitable donations, with the end result being a clear difference between the level of intended and actual donations received by the charity. Given that it acts according to the wishes of society, government can resolve this situation by ensuring that all people, through the tax system, make an appropriate donation, determined by the state as a portion of each “donors” tax payment, which can then be channelled to those recipients that society would like to see being made better off. In essence then, the underlying advantage of the welfare state is that government acts as an agent in ensuring that the socially desired level of altruistic gifts are provided by it to others as public goods.

 

The second advantage is that through state intervention, many of the transaction costs associated with altruism are minimised, enabling donations to be managed in a more efficient manner. At times, obstacles in matching donors with recipients arise, where a potential donor wishing to support a specific cause may be unable to find anyone worthy of giving aid to and will, as a result, make no donation whatsoever. By having an intermediary, such as government, bring different parties together, this obstacle can largely be overcome, benefiting donors, who know that a suitable party will receive their donations, as well as recipients, who benefit more than they otherwise would have due to a substantially larger donor pool. Another transaction cost to be reduced is that of information asymmetry, where a donor may have limited information relating to the validity of a potential recipient’s request for help. As a result, the donor may make an inappropriate judgement as to whether assistance should be provided, as well as to the most suitable way of providing aid. By allowing for altruistic activities to be undertaken only by public agencies, government can screen the authenticity of all claims for help, with the legal system ensuring that any negative effects that arise from exposure to inaccurate information are rectified. As a result, donors will be provided with a guarantee that their altruistic gifts will not be abused by fraudulent parties, but will rather go only to bona fide charitable causes.

 

Despite having such alleged attributes, welfare agencies have been criticised for having many of the same general flaws as the other government agencies actively involved in the economic system. For example, these agencies are seen as vast bureaucracies that absorb large amounts of inputs without producing many outputs, with substantial disenchantment being expressed in particular at their failure to assist people supposedly covered by the welfare net. In addition, they may actually increase the transaction costs of altruism, since greedy and unscrupulous recipients may be able to exploit the welfare system to obtain benefits they are not entitled to. In other words, information asymmetry problems may increase if people feel they can submit claims that are not authentic without being subject to scrutiny or any penalty by government. Finally, state charity can lead not only to a culture of dependency, but can also lower economic growth, because if resources are allocated to the non-productive today, less is available for all tomorrow.

 

Due to these problems, several new methods of collectively engaging in altruism have been developed by private parties to fill the void arising from government failings in this field. Of these approaches, arguably the most important has been the development of non-governmental organisations (NGOs), which actively complement the work carried out within official state welfare agencies. Like the welfare state, the first NGOs date back to the nineteenth century, although it was only in the late twentieth century that they really rose to prominence in the public mind. While there has been a rapid expansion in their numbers, they have not all grown in size at the same rate, for while most are what are euphemistically known as community, or “grass roots”, bodies with a few members, some have gone on to become large multinational entities, with tens of thousands of members located in branches worldwide. They are also formed to achieve a wide range of objectives, some of which could not be considered altruistic in the conventional sense [6]. For example, while NGOs such as Oxfam and 1999 Nobel Peace Prize winners, Medecins Sans Frontieres, provide food or medical aid in a direct manner to the needy, others work to achieve goals that encompass a much broader interpretation of altruism, such as Amnesty International (defending human rights) and Greenpeace (preserving the environment). Despite their differences, the common feature of NGOs is that all operate as non-profit organisations that depend primarily on donations from private individuals and institutions (including government) to carry out their work. As they do not aim to make profits, they cannot be counted amongst the businesses that operate in a market economy, nor, as their very name implies, can they be considered to be part of government [7].

 

There are several features that make NGOs superior to public agencies when it comes to the provision of aid. Probably their best attribute is their flexibility, which makes them well suited towards filling niches that would be overlooked by government agencies, which tend to have large, rigid structures. This freedom to adopt the most efficient size or organisational structure available enables NGOs to become specialists in whatever field they are in, allowing them to provide the recipients of aid with the type and level of assistance most appropriate to their needs. For example, in the field of health care, we find that NGOs are often well suited towards acting as support groups for patients with diseases such as Parkinson’s, Alzheimer’s and haemophilia, since their size and form allows them to be better informed as to how resources can be mobilised to the benefit of recipients. Furthermore, NGOs are considered to be more responsive to the changing circumstances and needs of recipients than their public sector counter-parts (who tend to adhere strictly to bureaucratic procedures), which is of particular importance in emergency situations where rapid reaction is required [8].

 

Another advantage is of a political nature. As NGOs are usually voluntarily formed by private parties, they may have a degree of legitimacy among other private parties that is lacking with state agencies. As NGOs do not need to report to public officials or politicians, they may not need to fulfil the wishes of parties with vested interests and will, therefore, be able to maintain a degree of freedom in the manner in which they operate. This may be of great value in situations where private aid donors or recipients have doubts about the integrity of state welfare agencies – by having the option of going to an outside party, these individuals are free to continue with their altruistic activities without having to deal with the government. For example, people may wish to distribute aid outside of government channels if they have political differences with official agencies [9], or if they feel that these agencies have been captured by interest groups that will prevent aid from being effectively distributed.

 

Finally, NGOs have often been able to deliver assistance more efficiently than public agencies. As a result, some of them have become government subcontractors, especially where state agencies no longer retain the will or expertise to operate within a particular field. This can be seen by considering the manner in which the American federal government provides aid to recipient states in Africa: in the past, funds were directly transferred by USAID to African governments for onward distribution by local state welfare agencies, but in recent years, there has been a major shift in policy, with an increasing portion of the $711 million worth of federal aid being re-routed instead through NGOs [10]. This change has come about since the donor state felt that NGOs are more efficient and less corrupt than the official agencies they have replaced, providing it with greater value for money.

 

Despite having these strengths, NGOs also suffer from a host of highly contentious drawbacks that has led to some debate as to their true motivations and worth. Firstly, as they are formed to pursue specific goals, they may overlook the impact that their work has on the long-term welfare of recipients. This is since tradeoffs between different altruistic policies need to be made where, in return for enduring a slightly greater level of inconvenience in the present period of time, recipients will receive a greater level of long run benefit. To illustrate this point, we can draw an analogy with the biblical parable of whether it is better give a person a fish for a day, or teach him how to fish for a lifetime. When crop failure due to poor farming methods strikes a certain area, one NGO may rush in to provide food aid to recipients in order to avert the prospect of starvation. While this may be admirable in the short term, if the NGO stays for too long it may create a culture of dependency, where recipients rely on it for food rather than take advantage of the assistance provided by another NGO that could teach them how to properly cultivate land even though, in the long run, this would be of much greater benefit to them [11].

 

Governments and other parties, especially in developing states, have also criticised NGOs for their activities. Among the charges levelled against NGOs is that they are guilty of acting according to foreign standards and notions of altruism that are deemed inappropriate in the host country. For example, NGOs may be accused of applying Western concepts of unbiased charity in countries with other belief systems, such as educating women and others who are locally deemed to be unworthy of receiving such aid. In addition, NGOs that have taken over the aid roles previously undertaken by foreign governments have been accused of being “neo-colonial” agents by acting in a way that perpetuates foreign standards and subverts local political and social institutions, particularly when they circumvent traditional channels of authority and influence when delivering aid, such as chiefs and ruling political parties. More generally, NGOs have often attempted to circumvent the authority of national legislatures in order to be accountable to nobody for their actions, and have even, on occasion, tried to coerce national legislatures, who have “the over-riding and difficult task of balancing competing interests against one another … in the interests of society as a whole” [12] to pass laws that are clearly in their own private interest. In this, they are identical to the special interest groups engaged in the economic activity of rent-seeking.

 

The funding activities of NGOs have proven to be particularly contentious, for with the recent proliferation of these organisations, many of which seek to achieve similar goals in the same field, a scramble has erupted where they have started competing with one another for access to the limited amount of donor funding available. The effect of this has been that some NGOs have started to resemble professional business corporations rather than the idealistic volunteer groups popularly portrayed by the media. While operating along business lines may force individual NGOs to behave more efficiently, a drawback is that some of these bodies, especially the larger ones, have been forced to dedicate increasingly larger shares of their donation income to fundraising activities even though, on aggregate, this yields diminishing quantities of donations. That is to say, while competition for money among profit maximising firms in a market is good in that it leads to greater efficiency, in an altruistic environment, it may be bad, because for every one donated rand that is diverted to fundraising, one less rand is available for use on final recipients (with no guarantee existing that this spent rand will ever be recouped through new donations) [13]. 

 

A related problem lies with the manner in which NGOs deal with potential donors, as some have implemented policies prohibiting the acceptance of donations from specified parties if they feel that accepting help from these parties may compromise their principles and independence. For example, Greenpeace refuses to accept any corporate or government donations whatsoever, while others, such as Amnesty International and the Salvation Army, do not accept help from donors whom they feel have questionable moral values, such as weapons manufacturers or liquor firms. While such an attitude may seem reasonable, given that such donors may only be donating according to the political motive, in order to try and change the public perception of them by showing that they actually have a good side, this position remains questionable. While all altruistic transactions entail a consensual exchange between the donor and recipient, we should bear in mind the validity of the old adage that “beggars cannot afford to be choosers”. By refusing to accept donations from certain sources, even if no strings are attached, NGOs may be exercising their freedom of association, but if this results in a lack of private funding that prevents them from carrying out their work effectively, then they will not be fulfilling their primary mandate, as they will be preventing recipients from benefiting from the provision of a donation. This can then become especially undesirable if it results in NGOs becoming dependent on government funding to carry out their work, as very often taxpayers, who provide these funds, may have no say as to whether these organisations should even be allowed to receive support in the first place, especially if they happen to disagree with the objectives of these organisations.

 

Finally, a cursory examination of the behaviour of some NGOs allows us to propose a hypothesis that NGOs (and other charities) will, if possible, seek to acquire a monopoly position in their field of interest. As we know, monopolies are bad for consumers as sellers, in their quest to maximise profits, will restrict output or engage in other activities that hampers the attainment of efficient outcomes. Now, it would be possible to refute this hypothesis by arguing that since NGOs are explicitly set up as non-profit bodies, there is no reason why they would seek to be single providers of charity as they would not make profits. However, we should note that there are alternative economic theories that argue that firms seek to maximise objectives other than profits when in a market, such as the maximisation of market share. Under such circumstances, we may see that NGOs have a very good reason to become the sole providers of aid to needy recipients, who are analogous to customers. By having the “market” all to themselves, NGOs would no longer need to compete for funds from donors for a particular cause. Rather, they would be the sole recipients of donations, with their sole status increasing their strength when it comes to acting as a special interest group trying to lobby government to act in their favour, such as provide them with funding (which are akin to rents) or granting them special powers that would normally be prohibited. Furthermore, NGOs would be able to perpetuate their existence – rather than act with every means at their disposal to provide relief, they may act to limit the flow of resources to final recipients or resist any proposals that could eliminate the status quo and reduce recipients’ dependence on them. While this may appear illogical, it is an entirely rational survival strategy for NGOs to pursue, for if they were to actually succeed in eliminating all need for their services, they would have no reason to continue operating or exist anymore. They would then have to either disband or operate in other charitable areas where competing (and possibly entrenched) NGOs operated, neither of which would be desirable to them as these options would limit their rent-seeking activities and remove any powers they had to influence policy.

 

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